Saudi Oil Exports Recover but Diesel Demand Keeps Crude Prices Intact

Saudi Arabia's oil exports have recovered significantly after the Hormuz Strait was reopened, but the price of crude is being kept in check by the steady demand for diesel fuel. The recent drop in crude prices has been largely attributed to a surge in diesel sales, which has not followed the downward trend of crude.

The refining capacity in the US is expected to fall by 371,000 barrels per day next week, adding to the existing strain on regional fuel supplies. This has led to a limit on how far sellers can push the correction in crude prices, despite the recovery in Saudi exports.

JPMorgan's satellite tracking data shows that Hormuz flows have increased significantly over the past six days, from 700,000 barrels per day in August to 2.9 million barrels per day. However, independent shipping data tells a different story, with only 12 commodity vessels passing through Hormuz over the weekend, down from 35 the previous week.

The market is currently pricing in the risk of disruptions to Saudi exports via the East-West pipeline, which has been damaged by Houthi strikes. The lack of progress on diplomatic efforts between the US and Iran has also failed to provide any significant relief to oil traders, who are more concerned with the immediate impact of reduced refining capacity.